Thursday, 13 December 2012

Fitness landscapes: Innovation, change, adaptive walks and Red Queens

Fitness is the capability to survive by demonstrating adaptability and durability to the changing environment (McCarthy, 2004: 129)

This is the first of two blog postings about how the evolutionary concepts of fitness landscape theory and cladistics can be used to understand and manage both innovation and change.The origins of fitness landscape theory are credited to Sewall Wright (1932). With the definition of “fitness” as the potential to compete and survive, and using mathematical models, he observed that populations of species had different strategies (physical and genetic properties) and associated finesses that could be plotted as a landscape (see Figure 1).He also noted that the process of natural selection would drive species to be like the highest peak on a landscape, and thus over time species would evolve and acquire the characteristics of the fittest member of the population.

In research on manufacturing strategies I explain how this same evolutionary process operates in the business world. When a company develops a new and more competitive strategy (i.e., a new fitter and larger peak on the landscape) companies in the same industry will (i) try and copy this strategy or (ii) innovate to try and surpass the new fitness gap. For example, consider Figure 1 and how the Toyota Corporation in the early 1990s changed the automotive industry landscape with its Just in Time manufacturing approach (Strategy B). It took a while and is still an ongoing evolutionary process, but now many automotive manufacturers have shifted from classic mass production strategies (Strategy A) to adopt the operating principles of Just in Time manufacturing (Strategy B). This process of strategic change can take many years and is a journey known as the “adaptive walk”.

"A successful or fit strategy will spawn a host of imitators who seek the same benefits" (McCarthy, 2004)

Here are some of the key insights that the fitness landscape model provides into the dynamics of competition, change and innovation:

Change and walking downhill - A strategic change (or the adaptive walk) often involves going downhill before you can go uphill. That is, in order to evolve to a fitter peak a company must first transition through a number of less fit positions on the landscape. This downhill walk represents unlearning or 'organizational forgetting' where companies try and forget or reject the practices define their current unfit position on the landscape. Companies will often have to stop doing what made them great in the first place, so they can fully transition to the next stage of their evolution.

The temptation to go back uphill - When companies embark on an adaptive walk that involves some form of downhill transition there is often a decline in company performance and increased levels of organizational distress. This is because the process of discontinuous change is initially very disruptive. The upshot is that many companies simply give-up on the change and walk back up the hill to maintain their old strategy and their un-fit place on the landscape.

Know your landscape topography - The topography of a fitness landscape indicates the competitiveness of an industry. For example, if an industry’s landscape resembles the Mount Fuji landscape (i.e. one peak surrounded by flat land) then this specifies an industry monopoly. In contrast, if an industry landscape looks like the Rockies (i.e., many peaks of different sizes) this indicates a highly competitive industry.

Landscape velocity and scanning- Industries have different velocity regimes – rates and directions of change (McCarthy et al. 2010) which are continually changing the topography of the fitness landscape. Thus, when companies pursue an adaptive walk they should also undertake landscape scanning in which they look to acquire and use information about changes in the topography of their landscape. This information is then used to assess and perhaps alter the adaptive walk route and destination.

The Red Queen Effect – The reason why industry landscapes are dynamic is because most companies are continually changing. Another consequence of this changing landscape is that competitive advantages are both temporary and relative. If you want to make progress over competitors, your velocity of change must be greater (or in a different direction) to that of your competitors. In evolutionary theory, this phenomenon is known as the Red Queen Effect from Lewis Carroll's book Through the Looking-Glass. In the story, the heroine Alice is trying to run away from the Red Queen but the distance between her and the Queen does not change:

"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else — if you run very fast for a long time, as we've been doing." "A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" (Carroll, 1917)

Further Reading

This posting is based on research and content from the following publications:

Carroll, L. 1917. Through the looking glass: and what Alice found there. Rand, McNally, 1917

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3 comments:

I was looking into the picture and wondering... the dotted line from the initial point (strategy A) to the last point (strategy B)depicts a trajectory in the business landscape. We are seeing the landscape after the last point was attained. So, the landscape that we are seeing now it's not the landscape during the trajectory. So, perhaps a point that we now see as a valley, was a small peak when the company was actually there... particularly if the environmental velocity is high

I hesitated in my reply, to a Everton fan, it took some courage than I rationalized out.

I was pointed to your fitness landscape article by Tim Kastelle, University of Queensland due to my ongoing interest and passion to link fitness landscapes, the dynamics in innovation and building corresponding new capacity.

Take a look at the dedicated site on this, in need of some fresh input from my end but never that far from my thoughts.

www.innovationfitnessdynamics.com

Thanks for prompting me again to take an adaptive walk, it seems a long journey to get to a final destination